Long-Term Care Financing: Growing Demand and Cost of Services Are Straining Federal and State Budgets

Long-term care relies heavily on financing by public payers, especially Medicaid, and has significant implications for state budgets as well as the federal budget. It includes an array of health, personal care, and supportive services provided to persons with physical or mental disabilities. As the baby boom generation ages, the number of elderly with disabilities will greatly expand the demand for long-term care services and will impose greater burdens on federal and state budgets. GAO was asked to discuss the budgetary and other challenges resulting from the anticipated increase in demand for long-term care services. This testimony addresses (1) the pressure that entitlement spending for Medicare, Medicaid, and Social Security is expected to exert on the federal budget in coming decades; (2) how the aging of the baby boom population will increase the demand for long-term care services; and (3) how these trends will affect the current and future financing of long-term care services, particularly in federal and state budgets. The testimony also highlights several considerations for any possible reforms of long-term care financing. This testimony updates prior GAO work, particularly Long-Term Care: Aging Baby Boom Generation Will Increase Demand and Burden on Federal and State Budgets, GAO-02-544T (Washington, D.C.: March 21, 2002).